The Lux against Britain’s data centre industry

A strong Pound and the EC are conspiring against UK hosts finds Nick Booth

I worry for the British data centre industry, which is silly because I’m sure they don’t lose any sleep about me. If they did, they might turn down the air con in all their facilities, which they could easily do without risk. This would give the nation’s power grid – and us all - a tiny bit of breathing space. As it is, at peak times, we’re operating at near total usage of our entire capacity for generating electricity, which is incredibly dangerous.

For this reason alone, many corporations are thinking of looking elsewhere for European hosting of their IT infrastructures, according to analysts quoted below. Factor in the strength of the pound and EC regulations knowhow, and there seems to be plenty of competition for european business.

Luxembourg is tempting. It is arguably the nation with the best all round connectivity in Europe. It’s got 23 fibre routes serving it, with 30 international competitors trying to be the best data carrier into the world’s biggest concentration of Tier IV data centres. LuxConnect alone has four. Commuting distance from London, Frankfurt Paris and Amsterdam is one millisecond (for a data packet) and around 60 minutes (for a data professional). So they’ve got tiny latency and a massive talent pool.

As one of the richest nations (per head) in the world it has secured power (certified ‘green power’ no less) far into the future. It is stability like that which makes Luxembourgers immune to the chinese curse of living in ‘interesting times’. But financial institutions especially love stability, so that lack of excitement is only likely to tempt them.

But the really sickening thing is that Luxembourg is a founder member of the EC and sits on all the councils that matter, with its man Claude Junker as president. You can’t compete with that sort of human networking. The Luxembourg government is anxious to attract new business and even government officials are easy to get a response from. “Luxembourg is indeed the most connected nations in the world and there are a lot of hard facts to underline this,” says Tom Kettels, policy advisor at the Department of State Media and Communications Services. Can you imagine UK official responding to an email inquiry within minutes?

“The great thing about doing business here is you can get decisions from officials on the day, because they can get everyone who matters in the room at the same time,” says Jonathan Evans, LuxConnect’s director of global alliances.

Hang on, that’s not what’s supposed to happen in the EC is it? Perhaps it does if your man is the president. Legislation is like a gun – it’s pretty powerful if you are behind it. There is even a mini industry that has grown up around Luxembourg’s lead on archiving legislation, which is too dull to detail here, but too important to ignore.

Meanwhile, another favourable tax regime, in Dublin this time, is persuading US companies to give London a swerve. Is the UK losing its influence?

Hosting and co-location clients aren’t moving away yet, says Clive Longbottom senior analyst at Quocirca. They are expanding their reach though. “London and Hayes and Slough are still important for co-lo providers to ignore,” says Longbottom. But recent shifts between the euro, dollar and the pound mean a US company might pay 40% more for a service in the UK. “That may not go down too well with shareholders,” says Longbottom. “While the exchange rates are messed up in this way, US companies may as well look to re-emergent countries where tax breaks are being made available again. As they are in Dublin, Amsterdam and Luxembourg.”

These days cloud service providers can easily choose to place points of presence in Tier II markets, like Stockholm and Vienna, before extending out into London, says Penny Jones, 451 Researchs’s senior analyst of European services.

Cloud and connectivity options made customers look beyond the London market for hosting digital infrastructure. “Any demand bypassing the UK will once again be about connectivity into other parts of Europe,” says Jones, “Luxembourg is ideally placed – though we have no evidence of growth.”

Still, as a precaution, it might be a good idea to do something about the power crisis.

This was last published in July 2015

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